Over the past ten days, an International Monetary Fund (IMF) mission team headed by Juha Kähkönen has reviewed progress under Turkey's economic program. The IMF supports the program under a stand-by arrangement covering 2002-04. Of total Fund financing of $17.5 billion, about three billion dollars remain to be disbursed.

Turkey's near-term economic prospects have improved over the last several weeks. The completion of the fourth program review in April, a rapid end to the war in Iraq, and prospects for up to $8.5 billion in loans from the United States have all helped bolster market confidence, resulting in lower interest rates and a stronger currency.

In this more benign environment, the government's macroeconomic targets of five percent growth and 20 percent inflation in 2003 remain feasible. To allow the favorable trends to continue, the government needs to strictly implement its economic program.

To reduce Turkey's high debt burden, the government must persist with prudent macroeconomic and reform policies. In this regard, meeting all the program's monetary targets for end-April and passage of direct tax reform legislation in April were welcome steps. However, the fiscal position is under pressure, and structural reform has faced delays in several areas.

The government and the mission have made significant progress on a Letter of Intent for the fifth review. To bring the review to completion, the authorities need to take steps to keep the fiscal program on track, and accelerate key structural reforms. With strong efforts by the authorities, the IMF Executive Board could meet to consider the fifth review before end-June. Completion of the review would trigger a disbursement of about $500 million. — (menareport.com)